It’s a common question, especially for people caring for a loved one with a disability. Attorney Steven L. Rubin with Drazen Law Group answers the most commonly-asked questions about pooled trusts.
What is a “Pooled Trust”?
A pooled trust is a creature of federal disability law, authorized by Congress under 42 U.S.C. section 1396p(d)(4)(C). Before this law was enacted, individuals with disabilities who received personal injury settlements, inheritances, or windfalls risked the loss of essential government benefits such as Supplemental Security Income (SSI) and Medicaid. In some cases, individual with a disability actually gave away their money to avoid losing their government benefits. Congress therefore stepped in and authorized non-profit associations like Plan of Connecticut, to create Trusts to which the funds are transferred. The Trust administers the money for the benefit of a person living with a disability (called the “beneficiary”).
What can the Trust money be used for?
The money can be used for the beneficiary’s “special needs.” For that reason, the term “Special Needs Trusts” has been coined to describe these types of Trusts. Another term that has been used is “Supplemental Needs Trust.” Generally speaking, the Trust money can be used to purchase any goods or services that SSI or Medicaid does not pay for — typically, non-support items that are other than essential medical care, food, shelter, and clothing.
You mean a beneficiary can receive government benefits and yet set aside an unlimited amount of money to pay for amenities like vacations and entertainment? The government allows this? What is the catch?
This is true, and there is a catch — two of them, actually. First, the Trust money no longer belongs to the beneficiary. Once the beneficiary transfers his money to the Trust, he cannot change his mind and ask for the money back. The money belongs to the Trust, which is required by law to distribute the money to or for the beneficiary’s best interests, subject to certain limitations.
Second, at the death of the beneficiary, any money that remains in the Trust account established with the beneficiary’s money, is paid to the State as reimbursement for any Medicaid benefits the State has paid out on behalf of the beneficiary. (Note: this applies to Medicaid benefits only, not SSI benefits.) After “Medicaid payback,” any remaining Trust money will be given to persons designated by the beneficiary, such as other family members. The beneficiary can request that the State not be paid back, however. Instead, the beneficiary may allow the Trust to keep the money, but the Trust must use the retained money for the benefit of other individuals with disabilities. The retained money will not be paid back to the government.
Why should I transfer my money to the Trust for the benefit of my adult disabled child if the government must be paid back after he dies?
There is no payback to the government of money that other people, including the child with a disability’s parents, transfer to the Trust for the benefit of a family member with a disability. Payback is required only if the assets that are transferred to the Trust are owned by the beneficiary, such as a personal injury settlement or inheritance.
Questions about pooled Trusts? Drazen Law Group can help. Just give us a call at (203) 877-7511.
Source: VistaPoints.org
